Sixty-one companies sell in the energy market in El Salvador
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Over the past several years, the energy market in El Salvador has witnessed a significant expansion, as indicated by the growing number of companies authorized to import or export energy to other Central American countries. This trend underscores the lucrative nature of buying and selling energy in the regional wholesale market from El Salvador. Currently, sixty-one companies are authorized to engage in energy import and export activities in El Salvador, a figure substantiated by data from the Regional Operating Entity (EOR).
In April alone, twenty-two companies imported energy, mostly from Guatemala, and twenty-three exported energy from El Salvador, according to Transactions Unit (UT) data. The number of companies is also much greater in El Salvador than in Guatemala, which has thirty companies that market energy. The rest of the countries in the region do not have marketing companies because their energy contributions to the regional market are minimal.
El Salvador’s Leading Role
With its most developed regional electricity market, El Salvador takes the lead in the energy sector, as highlighted by energy expert Roberto Saravia. “We are more active because we are in the middle of generation and demand,” he stated. Nicaragua and Honduras, in comparison, “are barely in their infancy” regarding energy commercialization, according to Saravia.
According to Saravia, the companies classified as marketers are the driving force behind the sector, enabling the flow of energy surpluses and providing an energy alternative at a better price for those who demand it. “From my point of view, it is good that there are more companies because they are managing the rules and energizing the sector,” he stated, instilling a sense of optimism about the sector’s growth.
How does El Salvador Generate its Electricity?
El Salvador generates its electricity through hydroelectric, geothermal, thermal, and solar sources. Hydroelectric power, primarily generated by the Executive Hydroelectric Commission of the Lempa River (CEL), significantly utilizes the country’s rivers to produce renewable energy. Geothermal energy is another substantial contributor, with LaGeo, a subsidiary of CEL, harnessing the geothermal activity in the region to produce electricity. Thermal energy, generated by burning fossil fuels, complements these renewable sources and helps meet the country’s energy demands, especially during dry seasons when hydroelectric output is reduced. Additionally, solar energy is increasingly being integrated into the national grid, supported by government initiatives and private investments to expand the country’s renewable energy capacity. This diverse energy mix ensures a stable electricity supply and positions El Salvador as a leader in sustainable energy practices within the region.
Continued Growth in the Energy Market in El Salvador
The energy market in El Salvador has been experiencing steady growth, with more companies entering the business each year. In 2013, fifteen energy marketing companies in El Salvador were authorized, followed by another eight in 2014 and seven in 2015. The trend continued in 2023, with six more marketing companies authorized, per the EOR statistics.
The Executive Hydroelectric Commission of the Lempa River and LaGeo, which are state companies that generate hydroelectric and thermal energy, respectively, have their own marketing companies. Other private companies, such as Alas Doradas and the distributor AES, also have companies dedicated to commercializing energy to sell the surpluses from their operations at a better price.
Profit Margins and Market Opportunities
The greatest incentive for marketing companies in the energy market in El Salvador is the wide profit margins they can achieve, depending on the purchase and sale modalities they employ. For example, Saravia explains that profit margins are between 3% and 6% in the Opportunities Market. However, he notes that this is a precarious market, requiring sufficient liquidity to make investments.
In contrast, the profits are higher in the contract market, where purchases and sales are established for six months, one year, or more. “The contract market is where the biggest profits occur,” said the expert, who worked for several years at the EOR.
In April, the country exported only 31.67 gigawatt hours (GWh) of energy due to the dry season, which reduced hydroelectric generation and limited the sale of energy to neighboring countries. Energy trading in the regional market is key to the composition of the national electrical system since it also generates income. According to data from the Central Reserve Bank (BCR), the country exported $14.43 million in energy from January to April 2024.
The dynamic energy market in El Salvador showcases the country’s strategic position and advanced infrastructure within the regional electricity market. With sixty-one companies engaged in the import and export of energy, El Salvador significantly outpaces its neighbors in energy commercialization. This growth is fueled by the attractive profit margins and opportunities in both the Opportunities Market and the contract market. The involvement of both state and private companies indicates a robust and competitive market, essential for sustaining economic growth and meeting energy demands. As more companies join the market each year, El Salvador’s role as a central player in regional energy trade continues to strengthen, promising further advancements and economic benefits.
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